Page 14 - NorthAmOil Week 28 2022

NorthAmOil NEWS IN BRIEF NorthAmOil

turn the taps back on after Covid-driven
cutbacks. But like in so many pockets of the
economy, the recovery is sparking a mismatch.
Sand suppliers have seen disruptions, labor
shortages and trucking bottlenecks. The chief
executive officer of US Silica Holdings Inc.,
the largest publicly traded frac-sand miner,
has dubbed the tight market “sandemonium”
and said his company is sold out.
That’s where Steve Brock and his upstart
sand-mining operation, Nomad Proppant
LLC, come in. Since the early days of the shale
the two acquisitions completed since the out of the region and to export and refinery revolution more than a decade ago, fracing
beginning of 2022.” markets on the Gulf Coast of eastern Texas. operators have relied on mined sand that’s
Earthstone’s latest transaction followed the Kinder Morgan announced June 29 a delivered to their sites by truck — across
June 27 announcement that Sitio Royalties planned expansion of its Permian Highway distances as long as 100 miles. Brock, Nomad’s
spent about $550 million on two acquisitions Pipeline capacity to about 550 million cubic chief commercial officer, wants to turn that
in the region as it also attempted to grow its feet per day of gas by November 2023, model on its head.
footprint in the Permian. targeting increased capacity at the Waha Hub His idea: Why not just use the sand that’s
For about $323 million, Sitio bought about where oil and gas from throughout the region right under your feet?
19,700 acres in the Permian from Midland, in New Mexico and Texas is gathered before Nomad has developed machinery that can
Texas-based Quantum Energy Partners, being transported to market. go directly to the frac wells (give or take 10
along with 12,200 acres for $224 million from Kinder Morgan Natural Gas Midstream to 20 miles), vastly reducing the burden of
Houston-based Momentum Minerals. President Sital Moody said the project would freight costs and the time-consuming process
This increased the company’s Delaware alleviate takeaway limitations in the region as of trucking.
Basin acreage to 24,500 acres and its Midland capacity grows instep with fuel demand. “We’re not brain surgeons here — all we’re
Basin land to 7,400 acres – amounting to “The project will alleviate transportation doing is finding the best spots and washing
a of 30 percent increase in Sitio’s Permian constraints out of the Permian Basin so as to and delivering the sand,” said Brock, 34.
Basin-wide position. further support meeting our domestic and “Frankly, that it took us this long to get here is
The acres were in Eddy and Lea counties, global energy needs,” Moody said. pretty wild.”
along with Loving County, Texas in the Jamie Welch, CEO of Kinetik, which joint- Brock left his job at Covia, one of the
Delaware Basin and Martin and Midland owns the pipeline with Kinder Morgan, said world’s biggest frac-sand miners, in February
counties in the Midland Basin. the expansion would improve access among 2020 to help start Nomad. It launched its first
Sitio CEO Chris Conoscenti said the gas producers to processing facilities. mobile sand mine in West Texas last month,
acquisitions were intended to drive up returns “This expansion couldn’t come at a more after the huge surge in prices. He calls the
for the company’s investors, as part of a critical time, as it will foster future natural gas timing “very lucky.”
market-wide trend toward asset consolidation production growth in West Texas and provide It’s sand scarcity, even more than price,
and improving profit margins following the several liquefaction facilities along the Texas that’s the big hurdle for oil drillers. Pioneer
market’s historic downturn as the COVID-19 Gulf Coast with more affordable, reliable Natural Resources Co., the Permian’s biggest
pandemic took hold in early 2020. supply,” Welch said. producer, said it expected oil and natural gas
“We are excited to announce these highly CURRENT ARGUS output would take a hit last quarter because of
accretive acquisitions in the Permian Basin sand issues. Things are so extreme that some
and continued execution of our returns- oil companies are shipping sand in by train
focused, large-scale mineral and royalty SERVICES from Wisconsin at almost double the cost.
consolidation strategy,” Conoscenti said. Whether Nomad and rivals like Hi-Crush
“We expect our shareholders to Frac price spikes 150% in Inc., one of the original frac-sand pioneers
significantly benefit from efficiencies due to that’s now also introduced mobile units, can
the increased scale of the Company and a Permian help solve the sand squeeze could play a
substantial increase to our dividend.” significant role in the global energy markets.
Noam Lockshin, chairman of Sitio’s Board Bumping along the desolate highways of the While drillers in the Permian have shown
of Directors said the Permian Basin would Permian Basin, the world’s busiest oil field, restraint in ramping up oil production,
prove valuable to the company in increasing there are long stretches where all you see are the last thing the world needs is for sand
production in the coming years. drilling rigs, sage brush and miles upon miles problems to place even more limitations
“The acquired assets are in highly valued of sand. That’s why it’s so strange that Texas on their output. The US, the world’s top oil
areas of the Permian Basin, meaningfully crude producers are facing a sand shortage of producer and among the biggest liquefied
increasing our line of sight to strong more than 1 million tons and prices that have natural gas exporters, has become an even
production growth in the near-term and jumped 150%. more important supplier in light of Russia’s
providing substantial remaining inventory,” Frac sand, which gets blasted through war in Ukraine and OPEC’s struggles to meet
he said. shale rocks to unlock oil and natural gas, is production targets. Meanwhile, deficits in
As operators are poised to increase their averaging $55 a ton, up from $22 at the end energy supplies — and the resulting surge in
fossil fuel output in the Permian Basin, so too of 2021, data from energy-research firm Lium prices — are among the biggest drivers of the
was the region’s capacity to ship oil and gas show. Demand is climbing as oil explorers dramatic rise in inflation across the planet.

P14 www. NEWSBASE .com Week 28 15•July•2022